Cathay's Default on Bond Reveals
Foreign-Investment Risk in China

HONG KONG -- Cathay International Ltd., which is partially owned by the Singapore government and invests in bridges in China, has defaulted on a US$350 million Yankee bond.

The default marks the first by a foreign infrastructure company investing in China and highlights the risk to foreign investors as Beijing clamps down on quasilegal guaranteed-return contracts. Many foreign investors, including Cathay, have struck deals with provincial and city governments in which the local partner promised a minimum return. But now,...